U.S. states join forces on fintech licenses

Reuters Staff

2 Min Read

NEW YORK (Reuters) - Banking regulators of seven U.S. states have agreed to simplify the way financial technology companies can apply for licenses, in a bid to make it easier for businesses to offer their services nationwide.

Representation of the Bitcoin virtual currency standing on the PC motherboard is seen in this illustration picture, February 3, 2018. REUTERS/Dado Ruvic/Illustration

The states of Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas and Washington, will recognize each other’s findings when assessing the suitability of companies applying for money service business licenses, the national organization of state bank regulators said on Tuesday.

Money business licenses are used by a wide range of young digital companies that provide financial services, from money transfer startups to bitcoin exchanges.

The initiative responds to longstanding complaints by fintech startups about the costly and time consuming process of having to secure licenses separately in each state in order to operate in the United States.

“This MSB licensing agreement will minimize the burden of regulatory licensing, use state resources more efficiently, and allow for broad participation by other states across the country,” John Ryan, president and chief executive of the Conference of State Bank Supervisors, said in a statement.

The Office of the Comptroller of the Currency (OCC), the main regulator for federal banks, has also tried to streamline the way fintech companies secure licenses.

In 2016, it proposed offering a special purpose charter that would let fintech companies such as online lenders operate nationwide.

State regulators have opposed the federal charter arguing that it could lead to weaker consumer protection.

The initiatives underscore the challenges faced by regulators worldwide as they try to keep up with dramatic changes in the banking industry amid the increasing use of digital technology that is reshaping the way financial services are delivered and consumed.